Oil slides, stocks rise on hopes of deal to end Middle East war

Oil prices fell and stocks mostly increased on Monday (Aug 3) as US President Donald Trump declared ongoing negotiations with Iran, despite Tehran s refusals. Crude futures dropped over four percent as markets disregarded Iran s denials, with Trump describing the two sides as conversing and Iran facing a final chance before decapitation.

The decline in oil prices contributed to a strong day on Wall Street, with all three major US indices rising throughout the day. The Dow surged 1.3 percent to an all-time high, while the other two major indices also showed significant gains.

Angelo Kourkafas of Edward Jones stated that the geopolitical developments and the drop in oil prices were fueling stocks to reach a new high, citing strong corporate earnings as supportive of stocks. Most large US tech companies advanced, with Amazon achieving a US$3 trillion valuation for the first time. While tech stocks faced pressure in Asia due to concerns of over-investment, European bourses welcomed the fall in oil prices.

Paris and Frankfurt both closed more than one percent higher, reaching record highs. However, London fell after the share price of AstraZeneca, a major pharmaceutical group, dropped nine percent due to a report suggesting a potential merger with US rival Bristol Myers Squibb.

Oil companies, which play a significant role in London's indices, followed the decline in oil prices. Earlier in the day in Asia, technology companies experienced heavy losses as traders worried about whether massive investments in artificial intelligence would yield long-lasting profits. SK hynix and Samsung dragged down South Korea's Kospi index after a Friday rally.

The yen gained against the dollar after US and Japanese authorities confirmed buying Japan's currency on the open market after months of weakness. The yen had recently reached its weakest point against the dollar level since 1986 due to higher US interest rates, rising oil prices, and capital outflows from Japan.

The dollar was mixed against other major currencies on Monday afternoon, trading around 157 yen compared to above 163 yen last week. Beyond geopolitical risks, attention was also focused on the prospects for the US economy following the Federal Reserve's decision to hold interest rates steady last week, despite calls from some policymakers to raise rates to combat inflation.

Throughout the week, US non-farm payrolls data for July and earnings from Disney, McDonald's, and SpaceX would serve as tests of the resilience of the US labor market.